Correlation Between Conagra Brands and Lamb Weston

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Can any of the company-specific risk be diversified away by investing in both Conagra Brands and Lamb Weston at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Conagra Brands and Lamb Weston into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Conagra Brands and Lamb Weston Holdings, you can compare the effects of market volatilities on Conagra Brands and Lamb Weston and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Conagra Brands with a short position of Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Conagra Brands and Lamb Weston.

Diversification Opportunities for Conagra Brands and Lamb Weston

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Conagra and Lamb Weston is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Conagra Brands and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings and Conagra Brands is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Conagra Brands are associated (or correlated) with Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Conagra Brands i.e., Conagra Brands and Lamb Weston go up and down completely randomly.

Pair Corralation between Conagra Brands and Lamb Weston

Considering the 90-day investment horizon Conagra Brands is expected to generate 3.7 times less return on investment than Lamb Weston. But when comparing it to its historical volatility, Conagra Brands is 1.21 times less risky than Lamb Weston. It trades about 0.04 of its potential returns per unit of risk. Lamb Weston Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,617  in Lamb Weston Holdings on May 12, 2022 and sell it today you would earn a total of  2,443  from holding Lamb Weston Holdings or generate 43.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Conagra Brands  vs.  Lamb Weston Holdings

 Performance (%) 
       Timeline  
Conagra Brands 
Conagra Performance
0 of 100
Over the last 90 days Conagra Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Conagra Brands is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Conagra Price Channel

Lamb Weston Holdings 
Lamb Weston Performance
22 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lamb Weston Holdings are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lamb Weston showed solid returns over the last few months and may actually be approaching a breakup point.

Lamb Weston Price Channel

Conagra Brands and Lamb Weston Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Conagra Brands and Lamb Weston

The main advantage of trading using opposite Conagra Brands and Lamb Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Conagra Brands position performs unexpectedly, Lamb Weston can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lamb Weston will offset losses from the drop in Lamb Weston's long position.
The idea behind Conagra Brands and Lamb Weston Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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